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Introducing Porterhouse
Ritholtz and Franklin Templeton team up to bring you the latest innovation in asset management
disclaimer: nothing in this note is intended as financial advice or an inducement to buy or sell any individual stock, see our full terms & conditions here.
I am extremely excited to tell you about the launch of our proprietary Porterhouse strategy, which is happening this week. If you’ve been watching me on CNBC or reading my columns at CNBC Pro, you’re very aware of the research we’ve done on The Best Stocks in the Market. I’ve spent almost 30 years on Wall Street and, in that time, I’ve learned an elemental truth about how people interact with the stock market - they simply don’t know where to begin.
You ask people why they’re trading the stocks they’re involved with and, for the most part, they can’t give you a good answer. They buy the things they hear about from friends or in a Barron’s article or based on what the anchors are talking about on TV. They buy the stocks that are in the news or, these days, in the memes. They follow random people on social media and trade the stocks they see other people trading. Or they take tips from their golf buddies or their nephew who “works in tech” or they get newsletters delivered into their inbox or whatever. Almost no one has a process. And their portfolio holdings reflect that randomness. Most investors don’t have a rhyme or reason for what they buy or when they buy it. They certainly don’t have a consistent answer for when they sell. It’s a combination of serendipitously hearing about a stock, a little half-assed research, a spontaneous decision to pull the trigger and then a periodic news look-up on Yahoo Finance.
They have no starting point. They take in all the noise and do sudden, non sequitur things. The result is the kind of portfolio slop we are frequently hired by people to fix. When we see the chaos that’s been wrought in people’s stock holdings - the overlap, the disparate position sizes, the concentrations, the missing sector exposures - it can sometimes call for portfolio triage. Trades turn into investments when stocks decline. Profits are taken impulsively in stocks that continue trending higher. Average-downs become quicksand. It’s a jungle out there.
I wanted to change that. I wanted to show people which pond they should be fishing in to start with. And then show them which fish to reel in and which to throw away. And then show them when to cut bait and put the rod down. I wanted to bring some semblance of order to the stock selection process. This was the genesis of the Best Stocks in the Market list that my research associate Sean Russo and I began to write and speak about. It became one of the most popular segments on my show, The Halftime Report. In time, this led to a twice-weekly column for the Pro site. I’m informed by CNBC’s editors that these columns are regularly among the most-read pieces they publish.
But the thing we kept hearing from people was “Why can’t you just do this for me?” There are hundreds of thousands of people who want to actively trade their own accounts, but millions of people who would prefer to have someone else do it for them. Porterhouse is our answer for those folks who want to be in the Best Stocks but don’t have the time, energy, focus or discipline to run it on their own. This obviously includes many of our own clients. This is the big idea that led to the creation of our new Porterhouse portfolio strategy.
We’ve built this on Canvas, which is the custom indexing platform run by Franklin since their acquisition of O’Shaughnessy Asset Management whom we originally partnered with in the early days of our firm. The relationship between Ritholtz and Franklin has enabled us to accomplish things for our clients that I had never imagined would be possible. We are a power user of Canvas custom indexing technology and this latest innovation is the culmination of years of cooperative effort.
In a letter to Ritholtz clients earlier this month, I explained:
In 19th century New York City, taverns known as porter houses began popping up, serving porter beer. The drinks sold a lot better when paired with a large, high-quality steak, which came to be known as the porterhouse cut, a name that would become famous around the world. Places like Peter Luger, Keens, and Old Homestead built their reputations on the porterhouse and have been serving it at the highest level for more than a century.
The name stuck because it came to represent something simple: if you wanted the best thing on the menu, you ordered it directly. Not a little bit of everything. Just the main event. “We’ll have the porterhouse, please.”
I’m writing today to introduce a newly launched equity strategy we call Porterhouse. It’s designed to work alongside our core asset allocation models and is available exclusively to Ritholtz Wealth Management clients who are elligible. We’re co-managing the strategy with our partners at Franklin Templeton, a global asset manager with more than $1.5 trillion in assets, with whom we’ve worked for over a decade.
Porterhouse builds on the same research behind our Best Stocks in the Market list you’ve heard me discuss on CNBC. It’s an active, quantitatively managed portfolio focused on capturing the returns of leading stocks as they emerge and persist. The approach is fully aligned with the evidence-based philosophy we’ve built our firm around.
Unlike many momentum strategies, Porterhouse is not based on price trends alone. We incorporate both fundamental and technical factors, focusing on companies showing both strong market performance and real underlying business momentum in areas like earnings and cash flow.
Momentum is one of the most rigorously documented effects in finance, first formalized by Narasimhan Jegadeesh and Sheridan Titman in 1993, who showed that buying recent winners and avoiding laggards led to persistent outperformance in U.S. equities. Subsequent research by Cliff Asness and others extended the finding across more than 40 countries and multiple asset classes, confirming it as a global phenomenon rather than a local anomaly. Long-run datasets compiled by Elroy Dimson and Paul Marsh show the effect holds over more than a century of market history, with consistent evidence that stocks with strong recent performance tend to continue outperforming.
What sets our strategy apart is the discipline around how the portfolio evolves. We are not buying a static basket and hoping for the best. The portfolio is regularly rebalanced and reconstituted on a consistent schedule, removing names that no longer meet our criteria and adding new entrants as leadership changes. This allows us to exit positions that are breaking down while continuously refreshing the portfolio with emerging leaders.
The number of holdings is not fixed. It expands when opportunities are abundant and contracts when they are not. When momentum becomes scarce, the strategy will hold fewer names and may carry more cash rather than forcing exposure into weaker setups. As the Apache proverb goes, when you find yourself riding a dead horse, the best strategy is to dismount. This is a dynamic approach by design, adapting to changing market conditions rather than assuming the opportunity set is constant.
Because of this, Porterhouse will not always look like the broader market. It may be more concentrated in certain sectors at times, and less exposed at others. It won’t always outperform, particularly during sharp reversals or periods where weaker stocks are rallying. There will be times when it feels uncomfortable, exiting stocks that later recover or avoiding areas that appear attractive on valuation alone. That’s the tradeoff.
Over time, the objective is straightforward: participate in sustained advances by owning the market’s leaders, while avoiding prolonged drawdowns by stepping aside when those leaders begin to break down. This requires discipline. The edge is not in predicting what comes next, but in responding systematically to what is happening now.
Like its name suggests, Porterhouse is about quality and concentration. We’re not trying to own everything. Premium cuts only.
We’re not positioning the strategy as a replacement for the diversified portfolios we manage as part of our core asset allocation strategy. It’s intended to compliment those portfolios and serve as a specific sleeve within the broader allocation. It’s been purpose-built for eligible clients who want it as an addition to everything else we’re doing. It won’t make sense for everyone, but for the people who want something like this, this has been a labor of love to bring it to life.
If you’re reading this and you’re not yet a client of the firm, perhaps this would be a good time to learn more about what we do and whom we do it for. There will be a 30 minute webinar next week to walk you through what Porterhouse looks like and how it works. I cordially invite you to join us by registering here.
Ritholtz Wealth Management (“Ritholtz”) is a Registered Investment Adviser. Registration does not imply endorsement or a certain level of skill or training. Advisory services are only offered to clients or prospective clients where RWM and its representatives are properly licensed or exempt from licensure. Advisory services are only offered to clients or prospective clients where Ritholtz Wealth Management and its representatives are properly licensed or exempt from licensure. Investing involves risk and possible loss of principal capital and there is no guarantee that the intended outcomes are achieved. Past performance is no guarantee of future returns. No advice may be rendered by Ritholtz Wealth Management unless a client service agreement is in place.
The Porterhouse Portfolio Strategy is separately managed through Franklin Templeton/O’Shaughnessy Asset Management, a Sub-Adviser of Ritholtz Wealth Management. The Porterhouse Portfolio Strategy is new, with no operating history, and therefore does not have a performance history. As a result, prospective investors will have no track record or history on which to base their investment decision.
Twelve Rules for Riding a Bubble
My friend Jeff deGraaf is a legendary technician and a cofounder of RenMac, one of the most respected institutional research platforms on Wall Street. I asked him to join us last night for an all new What Are Your Thoughts for a timely discussion about bubbles given what’s gone on with the memory chip stocks and the related explosion in the Korean KOSPI stock market.
Jeff’s says the US semiconductor sector became an official bubble a couple of months ago based on his definition of an index or sector that doubles inside of two years. Identifying a bubble is the easiest part. Knowing what to do when you’re in one and then actually doing it is much tougher. Which is why Jeff republished his 12 rules over the weekend.
Jeff joined us to walk us through his current thinking on the current state of the market and to explain his rules. It was epic, I hope you caught the show or have it on your list of things to watch / listen to.
In case you need the links, they’re below. Michael and I also discuss the AI capex boom as an industrial bubble and we take a look at the new record 115 stocks that are now worth over $100 billion. You’re going to love it, I promise!
Twelve Rules for Riding a Bubble
THE COMPOUND & FRIENDS
Twelve Rules for Riding a Bubble
Josh and Michael with RenMac’s Jeff deGraaf, what’s not to love?
